It’s Company Time!

Traversing the landscape of bureaucracy in search of a shiny ehf

Whether you sell handicrafts or make music, it turns out that you can start a company – most likely a private limited company, known as “ehf.” We spoke with Rannveig Lind Bjargardóttir, a Specialist in the Department of Collection and Registers at Skatturinn, to help us navigate the process without drowning in bureaucracy.

GV: What are the legal requirements and steps needed to start a company in Iceland?

In order to establish a company in Iceland you will need an Icelandic ID number (kennitala) or a System ID number (kerfiskennitala) if you do not have an Icelandic ID number.

To apply for a System ID number, form 17.62 (application of a system ID number) is sent along with the registration documents for the company. A System ID number does not grant the same rights as having a kennitala, only the ability to establish a company and take on roles in the company such as director or executive manager.

If the applicant has a kennitala and an electronic ID, they can apply for the registration of a new company online through our service portal via skatturinn.is. The process is quicker (3-5 business days) than providing us with registration documents on paper or via email (10-14 business days).

Before establishing a company, we recommend familiarising yourself with the rights and obligations associated with the legal form you intend to apply for. For example, different rules apply to private limited companies and limited partnerships in terms of personal liability. It’s important to know the main differences in order to decide what sort of legal form might be suitable for your business.

According to Law No. 138/1994 on private limited companies, the founders must be of legal age and their estate must not be under bankruptcy. All executive managers and the majority of directors of an ehf must be domiciled in Iceland. However, exceptions apply if they’re domiciled in the EU or an OECD member state. The minimum share capital of an ehf is 500,000 ISK. A state-authorised auditor or an independent person who provides assurance that the capital is paid will need to sign Form 17.21 (application for a new private limited company), confirming that the share capital has been paid. Please bear in mind that the share capital is not paid to Skatturinn.

GV: What’s the cost of starting a business in Iceland, including licences, permits and other expenses?

The registration fee is 140,500 ISK. Along with form 17.21, you need to submit Articles of Association (samþykktir), Founding Agreement (stofnskrá or stofnsamningur), Minutes of the founding meeting (stofngerð) and Form 17.27 on the registration of the Beneficial Owners of the company.

Templates of these ehf founding documents and other legal forms can be found on our website in Icelandic. These documents need to be provided to us in Icelandic according to the law, although the text of translation on the papers is allowed. These documents are created automatically within the system if standard options are chosen in the online registration process of an ehf.

Once the company has been registered, any changes on the company registration, for instance, name, change of directors, domicile, share capital, etc., is done via the company registry – either online if its an ehf or by providing us with relevant forms via email or in person. Changes to registration cost 3,700 ISK, irrelevant of the number of changes if they are all notified at the same time to the registry.

GV: What are some of the common mistakes or obstacles beginners might face?

There are far less mistakes if it’s done online, mainly because the system sort of creates documents for you. However, we are constantly seeing that people get confused about the registration of the beneficial owners, they tend to choose the wrong kind of ownership.

Registering a beneficial owner of a company is a legal requirement and it’s important that the type of ownership chosen for the beneficial owner when registering a company is in line with the founding documents. For example, if individual A is the founder and sole shareholder of company B, then A is considered to have 100% direct ownership and 100% direct voting rights of company B. If the sole shareholder of company B is another company, C, and A is the sole shareholder for company C, then A is considered to have 100% indirect ownership and 100% indirect voting rights in company B.

Photo by Art Bicnick

GV: Are there any industries that are particularly popular among new business registrations in Iceland?

It’s hard to pinpoint just one industry – there is a lot of diversity in the business scope of new companies. It varies from tourism companies, construction, creative purposes and everything in between.

You should explore the sector your company will be operating in very carefully. Different rules apply for different sectors, some of them are heavily regulated and some of them are not. For example, in the tourism industry, where you’re dealing with people and moving people around, you will need all sorts of extra permits regarding transporting people, safety measures, etc. We always try to do our best to guide non-Icelandic speaking nationals through the steps.

Read more about the process and register a company at skatturinn.is.